Buying A Business With No Money
The most popular methods to buy a business with no money of your own are SBA loan and Seller financing. There are more ways such as getting an equipment loan, depending on the type of business you are buying.
buying a business with no money
As discussed a bit at the beginning, there are multiple ways of closing a deal with no money of your own. Seller financing is the most popular method, where the seller allows you to pay off the business price over time.
Now say you got an SBA loan of 70% of the purchase price, how do you pay the rest? Own money? Absolutely not! You take an equipment loan to cover the rest. In most cases, SBA + Equipment loans together leave some good money on your hand even after paying the purchase price, which you can use to develop the business when you start.
You can also cobble together various methods to buy a business without paying any cash upfront. For example, you can use income-generating business assets to pay off the seller quickly. In addition, you could bring in a few additional silent partners to help you acquire the business and then buy them out later.
One thing to note is that most venture capitalists only invest in businesses with an existing plan. So, if you plan to use this approach, remember that you will need to sell the business or buy out the investor at some point.
The key to buying an existing business without money is to be able to get the deal done. Your ability to make a good no-money deal highly depends on your ability to sell yourself to the right person, the right way, and persuasively.
Many smart entrepreneurs prefer to buy an existing business instead of beginning a new one. Buying a business that is already operational will bring many benefits, including an already established product or service, well trained staff who know the business and enough success to have kept the company afloat for a period of time. Not having enough cash on hand to purchase the business will not necessarily keep you from buying it. Banks have been tightening their commercial lending standards in the last few years, but you can still find the funding necessary to purchase a business without using your own money.
The past couple of years has seen the rise of Amazon FBA aggregators, which are investment-backed groups tasked with acquiring and operating Amazon FBA businesses. While highly lucrative if done right, this type of operation is often far more complex than funding a single business and requires teams of specialists to manage a portfolio of businesses.
Business model: Running an ecommerce business and running a website are two very different experiences. One involves managing inventory and logistics, and the other might involve creating content or managing content creation specialists. You need to decide what type of business model you would like as well as your specific role within it. Do you plan to have a largely hands-on role, for example, creating content or responding to customers? Or do you plan to manage a team of specialists?
State of the business: Is this business experiencing a period of high growth or decline? This decision will likely depend on your level of experience with online businesses and your confidence in being able to restore a failing business or grow an already optimized one.
Buying a business, even with financing, is a major undertaking. As stressed above, we recommend speaking with an accountant or financial professional before committing to financing. We also recommend discussing financing an online business purchase with a qualified third party, such as a sales advisor.
Born and raised in Northern California, Nick spent a majority of his former years in a small country town, with a desire to eventually venture out into the global expanse. After university, what began as a year-long trip to Seoul to learn more about his Korean side, turned into an almost decade-long stay in Asia. After many years in online business, Nick joined Empire Flippers in 2019 to help his kindred spirits on the marketplace transition their own businesses. A fan of the simple things in life (pizza with only pepperoni, nothing else), when not in front of a computer, you will likely find Nick either at the gym hanging on a pair of gymnastics rings or stuffing his face with food in his neighborhood.
There are a lot of people out there who would like to be business owners, but there is one small problem that is keeping them from pursuing their dream: lack of available capital. The assumption is that without a large bank account, it is impossible to purchase an existing business.
You will likely need to find a seller who is willing to finance at least a portion of your purchase (more on this later), and you will need to find other alternative forms of financing. You also need to demonstrate the ability to operate the business successfully, which brings us to our next point: should you try to purchase a business with no money down?
Going into business is very risky, and most new businesses fail within their first five years. Therefore, purchasing an established business that has already stood the test of time is usually a better strategy.
Assuming you have determined that you have the necessary skills and experience to be a successful entrepreneur, here are some ways you can purchase an existing business without any money out of your own pocket:
The first key step to finding a business that you can buy with no money down is to identify businesses whose owners really want (or better yet need) to sell. Signs of a motivated seller may be owners who are close to retirement age, owners who are dealing with health challenges or health issues of a close family member, or businesses that have been for sale for several months with no buyers. An owner who is ready to get out is far more likely to entertain the idea of seller financing.
If you can find a business that is barely turning a profit or maybe losing money but could be turned around with better management and the right solutions, there is a much better chance that the owner would sell to you with little to no money down. Just be certain that you can turn the business around, because if you are not confident of this, then you could be getting yourself into a very difficult situation.
You could also get a little more creative with this strategy and ask the seller if they want to retain an ownership stake and become a silent partner. This might be an appealing option for some owners who do not want to work anymore but still want to enjoy some of the fruits of the business that they have worked so hard to build.
If all else fails, you can always try to raise the capital you need to purchase the business through crowdfunding. With crowdfunding, you can bypass financial institutions and raise money directly from the public. This could be done through equity crowdfunding, where public investors receive equity in your business in exchange for their funds, or through debt crowdfunding, where investors put up the capital for a business loan that you repay to them with interest.
Speak with a reputable CPA and accounting practice broker in your area. Business brokers help potential business buyers prepare for purchase, and they work closely with owners throughout each phase of the sales process to help ensure a smooth and successful transaction.
Most owners want upfront payment for the business and then hand over the keys. However, with a little luck, you can find an owner that will work with you to buy the business with no money upfront and payments spread out over time. Other business funding options, such as securing an equipment loan, may be possible with no upfront money,
Before you approach the owner of the business you want to buy, you need to do some preparation. Check your credit rating and clean up any errors on your credit report. Pay down credit so that your available credit is higher, which will improve your credit score. A high credit score shows the business owner you're responsible with money. Develop a resume that highlights your expertise in that type of business. Buying a business with no money is easier if you have experience running a restaurant; otherwise, it will be a challenge to show the owner you can generate enough profit to pay her.
Patience and research are key. The seller should be highly motivated to exit his company. That could mean finding a seller who has had his business on the market for 6 months to a year with no buyers. Another example would be an owner who is close to retirement and is amenable to a stream of income over several years rather than a lump sum. It could also mean a business whose owner has passed away or a partnership where one partner wants to leave.
A business that is barely profitable or even losing money is a better bet for you to buy with no money down than a highly profitable business. The trick is to have the experience and management ability to turn the business around. If the business fails, you will have lost the time investment you have made since you took over ownership.
Owner financing of a business is similar to seller financing of a home. Instead of getting a bank loan, the owner lends you the money, explains BizBuySell. The purchase contract specifies the interest rate, the principal, which is purchase price of the business, the number of payments, the amount of payment and what happens if you miss a payment. Owner financing increases the cash outlay for the business but does allow you to buy it with no money upfront.
Are you a business owner looking to expand your company by acquiring a competitor but want to preserve your liquidity? Don't let a lack of finances hold you back. It is possible to buy a business with no money down using SBA financing, and in this article, we will provide you with a guide on how to do just that. By following these steps, you can acquire the competitor you've had your eye on and take your business to the next level. So, let's dive in and explore how you can make it happen! 041b061a72